Elizabeth Warren, Kamala Harris, and Bernie Sanders have all trumpeted the original meaning of Medicare for All: a single-payer health care system. The Medicare for All Act of 2017, sponsored by Sanders, would outlaw all private health insurance companies (with the exception of private cosmetic insurance).

In the first Democratic primary debate on 6/26, Warren explained:

Look at the business model of an insurance company: it's to bring in as many dollars as they can in premiums and to pay out as few dollars as possible for your health care.

That leaves families with rising premiums, rising copays, and fighting with insurance companies to try to get the health care that their doctors say that they and their children need.

Medicare for All solves that problem.

However, one would think having a public option would be more efficient: If the private sector has to compete with a public option, then private companies would be driven by market forces to perform better or close. If the public option is truly better, then consumers would naturally buy into it.

What do the advocates of single payer claim are the advantages of eliminating private health insurance? How do they respond to claims that competition from the private sector forces the health bureaucracy to be more efficient?

Keep in mind that when a public, accept-anyone, option exists, private companies have an in incentive to find ways to steer the most costly customers towards the public option, keeping the most profitable customers to themselves. Examples from other industries: USPS vs FedEx/UPS, Amtrak vs Greyhound/Airlines. Under single-payer this type of public option parasitism would be curtailed.
– JustasJun 28 '19 at 16:24

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Yes, lower premiums would be a way for private companies to attract customers (then try to filter out the less-healthy ones). The private-public premium difference, in such case, would become profit to the company. Under single-payer, that difference would be used to subsidize the less-healthy customers, thus lowering the average premium for the overall population. I'm not sure whether that would meet everyone's expection of what is equitable.
– JustasJun 28 '19 at 17:07

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@Bobson gave it a hard edit to be objective.
– lazarusLJul 1 '19 at 21:02

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@lazarusL - I think you got public and private mixed up in the last paragraph, but I flipped that. Looks good to me now, and I've voted to reopen.
– BobsonJul 1 '19 at 21:07

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Hoisting my comment from below: as an NHS beneficiary who has had private cover as well I do find it a bit odd that single payer is proposing to outlaw duplication of coverage; this is not the case in the UK!
– pjc50Jul 2 '19 at 15:07

3 Answers
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However, wouldn't having a public option be more efficient? If the private sector has to compete with a public option, then private companies would be driven by market forces to perform better or close. If the public option is truly better, then consumers would naturally buy into it.

The "market forces" don't actually work as well here because they do not apply to the public option itself. Public option can defeat everyone in the private sector by doing things that are popular but lose money. If a private company does things that lose money, it has to either stop doing those things or it goes out of business. If the public option does things that lose money, it effectively is bailed out by taxpayers and can merrily keep doing those inefficient things.

This is why some people are against a public option; it can be a backdoor to single payer by means of killing off the private market slowly instead of quickly.

In a comparison of single-payer vs. public option, are the single-payer advocates right?

The only relevant difference is that the government becomes the only insurance company. Maybe it deliberately takes losses to make prices seem smaller, but there will still be a bureaucracy you have to fight with to get care, and there will still be pressure for that bureaucracy to say "no" based upon costs.

Would abolishing private health insurance be the method that gets most Americans the best coverage? What are the economics behind that?

No, because the purpose of single-payer arrangements is usually not to give everyone "the best" coverage, but to give some basic level of coverage to everyone, including people who do not have it now. Countries that adopt these schemes (really, Britain and Canada) usually allow people to buy additional insurance for services not typically covered by the single payer.

However, wouldn't having a public option be more efficient? If the
private sector has to compete with a public option, then private
companies would be driven by market forces to perform better or close.
If the public option is truly better, then consumers would naturally
buy into it.

Not really. The public option would likely be cheaper coverage in a like-for-like comparison. Medicare already has lower administrative costs than private insurers do ($132 per person vs $700), so it's already more "efficient," and a public option would be more efficient than private insurance for the same reasons. The competition would never help to make the public option any better, because its price already are set without a profit motive. The competition might make the private insurance cheaper, but it will never be as cheap as the public option until they are operating at 0 profit (and even then it won't be as cheap, because they have greater administrative costs).

Meanwhile, an existing competition between public and private insurance would be keeping the public option from having all of the market share. The problem with this is that, the more people are covered by a public option, the more that economies of scale can help lower administrative costs per customer, because there will be fewer bureaucrats working per customer. For example, the people who write software that helps price medical procedures will not substantially balloon as more customers come on board. 20 software engineers can write a program that serves 2 million customers as effectively as they can serve 300 million customers. So there are certain kinds of bureaucratic administrative costs that don't grow with more customers, and that means more customers results in proportionally lower administrative costs per customer.

Would abolishing private health insurance be the method that gets most
Americans the best coverage? What are the economics behind that?

Private insurance is analogous to a flat tax, and single-payer healthcare is analogous to a progressive tax. This is because most people who have a single-payer plan have in mind that the burden to pay for it would be disproportionately shouldered by the wealthy. Private insurance, on the other hand, places an equal absolute burden on a person who makes $10,000/year and a person who makes $1 billion/year. So, single-payer healthcare is likely to help ensure that all Americans have health coverage, no Americans are crippled by extraordinary medical bills, and wealth inequality would be eased slightly. Private insurance would continue to keep tens of millions of Americans uninsured, many Americans will crippling medical bills that ruin lives, and continue the tide of wealth inequality that is steadily growing in America.

Related economic consequence of single-payer: this would also free-up more spending money for lower and middle class Americans, who are the classes that proportionally spend the most of their money, and spend it the fastest when they get it. This would lead to increased consumer spending, increased economic velocity, increased job creation in the private sector, lower unemployment, increased wages (and probably some inflation too). Having more Americans covered under healthcare and fewer Americans bankrupt due to medical bills also implies increased quality of life.

"This is because most people who have a single-payer plan have in mind that the burden to pay for it would be disproportionately shouldered by the wealthy." This is incorrect, both as an assumption and that most people proposing it have it in mind. Bernie Sanders has explicitly said that middle class taxes will have to go up in order to pay for this and other proposals.
– JoeJun 28 '19 at 18:32

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@Joe of course taxes will literally go up. You will stop paying out of pocket, and instead your insurance will be paid for through federal revenue. So, this could mean paying $700 less out of pocket and paying $600 more in taxes. Your taxes are going up, even though you're experiencing a net savings. "According to Sanders, any tax increase as a result of his plan would be less than what an average family currently pays in premiums, co-payments and deductibles for health insurance." washingtonpost.com/politics/2019/06/03/…
– JohnJun 28 '19 at 19:31

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@Joe There's really nothing to support that claim. If your net costs are going down, then you aren't shouldering more burden. If the wealthy's net costs are going up, then they're shouldering more burden. If your out-of-pockets expenses drop by $1,000/month and your taxes go up by $10/month, would you still argue that you're shouldering the burden? You're only shouldering the burden if you pay more than your share of the costs, i.e. if your taxes go up by more than your out-of-pocket expenses; which is precisely the opposite of the quote I provided.
– JohnJun 28 '19 at 20:28

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@John The problem with your Bernie link and everybody else's claims of government efficiency is that the numbers don't add up. The government provides medical coverage to roughly 1/3 of the people and yet spends darn close to twice as much per person while providing inferior quality. You can't claim with any credibility that adding 2x more people to a single payer option will have any other effect on costs other than near tripling the cost of healthcare. Facts are facts. The real numbers show exactly how efficient the government is. Claiming increased cost efficiencies is nothing but lies.
– DunkJul 1 '19 at 20:13

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@Dunk Do you have any sources of those facts ("facts"?)?
– M i echJul 2 '19 at 6:43

Look at the business model of an insurance company: it's to bring in as many dollars as they can in premiums and to pay out as few dollars as possible for your health care.

That is not the purpose of an insurance company. They assume the risk for large sudden costs so that you can budget and enjoy protection with smaller, spread out payments. Assuming catastrophic risk is a valuable service. Some insurance companies do make a profit but that isn't required - consider Mutual of Omaha, a co-op.

Are you conflating a public option with a nationalized health service? Public option (to me) simply means the option to choose who administers a healthcare insurance program (viz: Medicare versus UHC or Aetna) for an individual. It does not mean that one's doctor works for the government.
– BobEJun 28 '19 at 19:34

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I don’t think zero upfront cost is part of the discussion here. Copays have been devised as a way to counter that pressure to consume. Also, I’m not sure calling it a tax “bailout” is quite right. With a public option, the tax functions as your premium, no?
– DanielJun 28 '19 at 23:06

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@Daniel Co-pays are undervalued. The same $10 co-pay covers both a shot and a thousand-dollar MRI. Insurance Makes Healthcare More Expensive. I would advocate for co-insurance instead (say 10% of the real cost, so $1.50 co-insurance for the shot and $150 co-insurance for the MRI) to keep price discrimination active. Tax bailouts occur because incompetent administrators under-price services, leading to bankruptcy at end of fiscal year, requiring a lump sum bailout from congress.
– ChloeJun 30 '19 at 18:13

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You are wrong in literally your first sentence. Purpose of company is making profit. It's literally the only purpose of company. Practicalities differ, but it's always getting as much as possible while paying as little as possible. Raising insurance premiums and fighting against paying out anything is logical and natural conclusion of for-profit healthcare.
– M i echJul 2 '19 at 6:40

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Citation needed on "people die in ambulance queues" in the UK (linked search just says they queue), as well as proof that this doesn't happen in the US system and that nobody has ever died in the US because they couldn't afford to call an ambulance?
– pjc50Jul 2 '19 at 9:21